Despite the recent run of good news for the stock market, Tuesday saw many U.S. stocks come crashing down, showing big losses in a single day, and the U.S. stock market drop, harming the greenback.
Some of the biggest losers on the day include Chipotle Mexican Grill, Inc. (NYSE:CMG) and Advanced Micro Devices, Inc. (NASDAQ:AMD), both of which suffered over 13% drops following weaker-than-expected earnings reports.
Many of the central banks across the world, including the U.S. Federal Reserve, the Bank of Canada, and the European Central Bank, have all begun to rein in interest rate hikes. The Canadian dollar also suffered as a result. The Fed has the added complication of selecting a new head as Janet Yellen’s term expires in February. Yellen will remain as a member of the Federal Reserve board until 2024, however, unless she steps down.
President Donald Trump has not said whether Yellen will be reappointed for another term or if a fresh face will take over.
The dovish tones from many of the central banks, however, will likely boost investment into the current booming markets, although more and more analysts are coming out and saying that there could be a bubble on the rise. The risk of a U.S. stock market drop weighs heavy on the minds of many who remember the boom times that preceded the Great Recession in 2008.
Many picks on the stock market this year have also been highly inflated due to speculation. Bitcoin, for instance, has become the hottest trade in the country as the coin and other cryptocurrencies have jumped hundreds, sometimes thousands of percentage points.
All the while, stock market analysts and executives have warned how bubbles created by cryptocurrencies and other highly inflated—in their view—buys will affect the market, potentially putting the U.S. in a situation not unlike 2008, where the market was riding high preceding the disastrous fall.
Uncertainty over the next Fed leader is also weighing on the markets.
“Dollar, Loonie Decline as Euro Outperforms Ahead of ECB Decision,” Bloomberg, October 25, 2017.